Waiver Provisions in Other Party’s Contracts May Shield Design Professionals, Contractors, and Others from Liability in Certain Situations

Waiver Provisions in Other Party’s Contracts May Shield Design Professionals, Contractors, and Others from Liability in Certain Situations
January 28, 2025 ASCE Member Insurance
Waiver Provisions in Other Party’s Contracts May Shield Design Professionals, Contractors, and Others from Liability in Certain Situations

Waiver Provisions in Other Party’s Contracts May Shield Design Professionals, Contractors, and Others from Liability in Certain Situations.

By Sarah A. Johnson, Esq.

It is not unusual for parties to a construction-related contract to waive certain claims therein. However, the parties may not always fully understand or intend the consequences of the waiver provisions included in their contracts.

One illustrative case concerning waiver is Board of Trustees of Oakton Community College Dist. #535 v. Legat Architects, Inc.1 The Oakton case involved a complaint filed by the plaintiff college against the architect, other design professionals, and the construction manager, alleging breach of the parties’ contracts in connection with the construction of a building on its campus.2 During construction, the concrete slab settled as much as two inches in some places and had to be demolished and replaced, resulting in added costs.3

The contract between the plaintiff college and the construction manager (the “CM Contract”) contained a “Waiver of Subrogation”4 provision, wherein the owner and contractor agreed to waive all rights against each other and the architect and the architect’s consultants as well as certain other contractors for damages caused by fire or other causes of loss to the extent covered by the property insurance obtained pursuant to the agreement or other property insurance.5 The defendant architect brought a motion for summary judgment arguing that the plaintiff college waived its rights against the architect for damages in the CM Contract, which motion was granted.6

The court found that the architect was a third-party beneficiary to the Wavier of Subrogation provision in the CM Contract despite language elsewhere in the Contract, stating “Nothing contained in this Agreement shall create a contractual relationship with or cause of action in favor of a third party against either the Owner [plaintiff college] or the Construction Manager.”7 In doing so, the court found it particularly relevant that the architect was pursuing an affirmative defense as opposed to a cause of action and thus found no conflict between the Waiver of Subrogation provision and the no contractual relationship provision.8

The court also found that the plaintiff college waived the cause of action it was pursuing against the architect even though the insurance carrier had not paid the full amount of the damages being pursued and the cause of the defect remained undetermined.9 The court reasoned that the CM Contract required an all-risk insurance policy, which covers all losses not resulting from misconduct or fraud and that the plaintiff college’s claims against the architect were not based on misconduct or fraud.10 The court concluded that the college and the construction manager intended to allocate any losses to the insurer, making the amount of loss and cause of the defect in the concrete slab irrelevant to the issue of waiver.

As the Oakton case illustrates, waiver provisions may have far reaching and conclusive consequences on a party’s ability to pursue certain claims. Design professionals should review waiver provisions in their contracts closely and obtain legal advice as to the consequences of same in order to avoid any unintended waiver of claims. On the other hand, when confronted with a claim, design professionals should obtain the contracts between the other parties involved in the project and carefully analyze the waiver provisions therein to determine if they provide a shield from liability, or a defense against the claim.

1 Bd. of Trustees of Oakton Cmty. College Dist. #535 v. Legat Architects, Inc., 2022 IL App (1st) 210155-U.
2 Id. at ¶ 4.
3 Id.
4 “Subrogation” is defined as “The substitution of one party for another whose debt the party pays, entitling the paying party to rights, remedies, or securities that would otherwise belong to the debtor.” Black’s Law Dictionary 1467 (8th ed. 2004)
5 Id. at ¶ 6.
6 Id. at ¶ 8.
7 Id. at ¶¶ 25-29.
8 Id. at ¶ 28.
9 Id.at ¶¶ 30-34 (citing Rosemont v. Lentin Lumber Co., 144 Ill. App. 3d 651, 664 494 N.E.2d 592 (App. Ct. 1986).
10 Id. at ¶ 33.